A dispute between Kakao Corp. management and its labor union is growing over the IT giant’s rumored attempt to sell its transportation service subsidiary Kakao Mobility to private equity firm MBK Partners.

Kakao’s labor union on Wednesday accused the management of giving up on its mobility business, questioning if the sell-off to the private equity fund can help the business grow.

According to the union’s statement, Kakao Corp. said its mobility platform cannot grow anymore under its wing, and that the IT giant has no intention of continuing with the mobility business. It added that Kakao’s management said the sale was necessary for the business to expand.

The union sees the sale of Kakao Mobility as an attempt to prevent Kakao founder Kim Beom-su from being asked to appear at the National Assembly’s state audit this year. It said it would resume collecting signatures from Kakao Corp. employees for a petition, which was launched in June when rumors of a sale first began swirling, to oppose the deal.

Shortly after the union’s statement was released, Bae Jae-hyun, the company’s chief investment officer, downplayed the sale rumors. He said in an internal notice that the company has never considered an entire sell-off.

“What we are considering is changing Kakao’s stake in (Kakao Mobility) to become the second-largest shareholder by selling (a 10-19 percent stake),” he said.

This suggests MBK would also buy shares from other owners to become the largest shareholder.

Kakao Corp. owns a 57.5 percent stake in Kakao Mobility while a consortium led by US private equity firm TPG holds a 29 percent stake and the Carlyle Group has a 6.2 percent stake.

The CIO added that the company is contemplating how Kakao Mobility can grow bigger beyond Kakao Corp.’s boundaries, saying no decisions had been made.

The union last month met with the IT giant’s leadership including Kim Sung-su, chairman of the board of directors, to oppose the sale.

Kakao Mobility went into turmoil after June 14 when it was reported that MBK Partners -- one of the largest private equity firms in Asia -- was in talks with the IT giant to buy a 40 percent stake in Kakao Mobility, which was valued at 8.5 trillion won ($6.6 billion).  

Despite Kakao Corp.’s explanation that nothing was decided at the time, the sudden news sparked outcry from employees, as the company even had picked underwriters in March to go public on the Korea Exchange this year.

Kakao’s labor union then began collecting signatures of employees and staged protests to oppose the sale of Kakao Mobility. The union denounced Kakao Corp.’s leadership for reneging on its promise to undergo an initial public offering. Previous IPOs of Kakao subsidiaries have included stock options for employees.

Prospects of a stock listing have faded due to weak market conditions and damage to the corporation’s image after Kakao Pay executives dumped shares in the company in December last year.

The executives, including Ryu Young-joon, CEO of Kakao Corp.’s mobile payment unit, exercised their stock options to sell company shares only a month after Kakao Pay’s listing, reaping a windfall of almost 90 billion won.

“Kakao pulled out the sell-off card just three months after it had vowed to carry out shareholder-friendly policies. Isn’t the company trying to retrieve its investment in a different way as the option of going public is likely blocked?” said the union.

A staffer at one of Kakao Corp.’s subsidiaries told The Korea Herald that Kakao Mobility employees have been feeling “uneasy” as the direction of the company is now unclear.

“We don’t know too much about what’s going on with the rumored sell-off. We just hope things become clear soon,” said the staffer who requested anonymity.

Kakao Corp. is under pressure to resolve things one way or another, as an IPO this year was among the conditions of the minority shareholders’ investments in Kakao Mobility. It is almost certain that there would be penalty clauses for failing to list, such as a requirement to buy back shares at an elevated price or to engage in a joint sale to a third party.

But with the stock market in freefall, MBK Partners will be in no hurry to complete the acquisition, according to an analyst at a local private equity firm.

“The value of technology stocks has decreased, so I think it is unlikely (for MBK Partners) to buy (Kakao Mobility) at the value of 8.5 trillion won. MBK Partners has no reason to go for that price at the moment,” he said.

The analyst noted that MBK Partners will also consider tag-along rights of TPG and the Carlyle Group during negotiations with Kakao Corp. Tag-along rights allow minority shareholders to sell their shares if a majority shareholder is negotiating a stake sale.

If MBK Partners were to acquire a 40 percent stake from Kakao Corp. as well as all shares owned by TPG and the Carlyle Group, it would approximately cost 6.4 trillion won.

“Such a large deal could put some burden on MBK Partners, so won’t they try to push the price further down?” the analyst said.

Since the second half of last year, Kakao Mobility has been under fire for hiking ride-hailing fees and expanding into new business areas to provide designated driver services, quick delivery and parcel delivery. The mobility application operator faced heat from the public as its expanded services drove small merchants and business owners out of work. 

An IT industry source told The Korea Herald that the sale of Kakao Mobility could give Kakao Corp. some breathing room.

“Kakao’s public image has worsened over the past year and Kakao Mobility was one of the major reasons behind that. So I think Kakao might want to detach itself from the mobility business. If a deal is made, it would give Kakao instant cash,” the source said.

After Kakao Mobility began as a spinoff subsidiary from Kakao Corp. in 2017, it quickly became the country’s largest mobility platform service provider. Kakao Mobility has 30 million cumulative users and 10 million monthly active users, as of July.

The company recorded annual sales of 546 billion won last year, almost doubling from 2020, and posted operating profits of 12.5 billion won to be in the black for the first time.